Vodafone, Yahoo: Mobile Ads in the UK

We said yesterday it would likely take several years for mobile advertising to grow big enough to cause a major shift in the mobile industry — or in Google CEO Eric Schmidt’s terms, lead to free cell phones. Today Yahoo and Vodafone announced a mobile advertising deal, indicating that they would like it to be a lot sooner than that. Vodafone wants more sources for revenues, and it also posted a net loss for the first half of 2006.

Yahoo and Vodafone plan to start the mobile ad service in the first half of next year, though, we still think substantial revenues from mobile ads is likely years away. What actual savings customers get out of this agreement is hard to figure out from the press release, and we are waiting to hear back from Vodafone with more details:

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“customers who agree to accept carefully targeted display advertisements can expect to enjoy savings on certain Vodafone services. This proposition could extend to key Vodafone mobile assets including the Vodafone live! portal, games, television and picture messaging services.”

It’s pretty telling that Vodafone is working with Yahoo for this specific deal, and not Google. Google hasn’t always been willing to play nice with carriers, though has started to make more deals recently. Schmidt’s recent suggestion that cell phones should be free with ads shows how Google’s dominant brand name could be more threatening than beneficial to some wireless carriers. It will be interesting to see which carriers do deals with Google vs Yahoo on which mobile services.

There are some interesting issues that Vodafone will need to sort before implementing this new revenue stream. There is the issue of explicit permission to be sought from the customer. By packaging the product so that the price reflects an implied permission from the customer, that may be manageable. However as far as ‘free’ phones are concerned, most mobile operators in Europe already offer free upgrades yearly to pretty good phones, in exchange for annual contracts being renewed so I don’t see how that will fly.

Vodafone is now also advertising home broadband services in the UK, so the game needs be watched in entirety.

Thanks for sharing this Karen. Yes, I have heard of such collaboration and in Asia, have even seen Myspace.com ready phones.

Yet have already seen “free phones” happpening in Asia without mobile ads. But these are simple voice phones in exchange for long term contracts without any mob ad (maybe some text spamming from the phone companies). More sophisticated phones especially 3G phone are too expensive to subsidise- so maybe Google needs to explain which type of phones they mean.

I do see increasingly companies such as Yahoo making sure their software is preloaded into the phones and mob ads to ensure eyeballs to their sites as the “desktop” of the 3rd screen. This could add to ARPU of mobile companies or vice versa. Where mob ad for free phone services though, there is the story not studied enough of whether users want free phone services in exchange for being bombarded by ads. Maybe the consumer young user won;t mind but not the business user??

Perhaps it may help to split the issues, as we see things unfold. Many aspects of this equation could happen sooner than later.